The following is management's discussion and analysis of financial condition and results of operations and is provided as a supplement to the accompanying unaudited condensed financial statements and notes to help provide an understanding of our financial condition, results of operations and cash flows during the periods included in the accompanying unaudited condensed financial statements.

In this Quarterly Report on Form 10-Q, "Company," "the Company," "us," and "our" refer to Quarta-Rad, Inc., a Delaware corporation, unless the context requires otherwise.

We intend the following discussion to assist in the understanding of our financial position and our results of operations for the three months ended March 31, 2021 and 2020. You should refer to the Financial Statements and related Notes in conjunction with this discussion.





Results of Operations



General

We were incorporated under the laws of the State of Delaware on November 29, 2011 with fiscal year end in December 31. We were formed to distribute and sell detection devices to homeowners and interested consumers in North America. Initially, our business plan was to sell products on consignment from Star Systems Japan, a corporation owned by our majority shareholder. We purchased these products from Quarta-Rad, Ltd., a company owned by our minority shareholder. We also targeted direct-to-consumer sales since we believe we can distribute these products through the Internet. We have never been party to any bankruptcy, receivership or similar proceeding, nor have we undergone any material reclassification, merger, consolidation, purchase or sale of a significant amount of assets not in the ordinary course of business.

During April 2020, we acquired Quarta-Rad USA, Inc., a Delaware corporation, as a wholly owned subsidiary. There was no consideration paid for the shares. The purpose of the acquisition is to separate the sales of certain products in separate entities. There was no activity, assets or liabilities in the subsidiary through March 31, 2021.

During December 2020, we acquired Sellavir, Inc, a Delaware corporation, under common control, as a wholly owned subsidiary. We acquired the company in exchange for 333,333 shares of our common stock. The value of the stock on the date of issue was approximately $170,000. Sellavir is a video analytics company whose platform empowers organizations to decode videos to develop creative marketing strategies and analysis through advanced and proprietary technologies.

As of the date of this Form 10-Q, we continue to expand our operations and expect to increase our revenues with additional working capital. Our chief executive officer and director, Victor Shvetsky, and our director and president, Alexey Golovanov, are our only employees. Mr. Shvetsky and Mr. Golovanov will devote at least ten hours per week to us but may increase the number of hours as necessary. Beginning in 2013, we began purchasing the products from Quarta-Rad, Ltd., our related party supplier and it shipped the products to us. We then shipped the products to a third-party online retailer, to hold for Internet sales and sales to our third-party resellers.

Our administrative office is located at 1201 N. Orange St., Suite 700, Wilmington, DE 19801, which is a virtual office.

We continue to focus our business operations on the development of our distribution agreements and reseller network as well as continue to advertise on the Internet. We plan to continue to utilize our website to promote the products to home renovation contractors and other purchasers of detection devices. We are promoting the detection products by advertising our website and marketing to independent distributors and others interested in detection devices. We purchase the products from QRR, which is owned by our minority shareholder and is the original manufacturer for RADEX product line. Under an oral agreement with QRR, we have the exclusive distribution rights for sale of QRR products in Europe, the US, and Asia (excluding China) for a period of 10 years. We sell the products we purchase from QRR directly to third party buyers and to resellers. The purchase terms require us to prepay for the products we purchase at a price that is set forth in each purchase order. In October 2018, our United Kingdom retail platform was suspended due to certain UK restrictions. We are in the process of becoming compliant in order to lift these restrictions and exploring and testing new partners for EU distribution. We have reserved $100,000 on our balance sheet as accrued expenses in connection with this matter. The Company paid $41,822 during 2020 towards the estimated liability, a remainder of $58,178 is included in accounts payable and accrued expenses as of March 31, 2021. In April 2021, we paid $35,679 towards this balance.





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Sellavir Consulting:

We expanded our operations through the acquisition of Sellavir Inc. in December 2020. Sellavir is an AI company that leverages its knowledge in neural networks to provide customized AI and development services to our clients. Our services are focused on offering customized solutions for image processing. Our current business model relies on identifying the specific customer needs and developing a software solution to address them. We currently do not have any clients in the US, and our sole revenue stream is from our Japanese reseller. We rely on their sales staff for the identification of new opportunities in the Japanese market. Quarta-Rad has acquired the company to:

- leverage Sellavir capabilities to combine it with its Radex series to offer AI-enhanced radiation detection capabilities

- expand its scope outside the radiation measurement

Critical Accounting Policy and Estimates. Our Management's Discussion and Analysis of Financial Condition and Results of Operations section discusses our condensed financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these condensed financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the condensed financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to revenue recognition, accrued expenses, financing operations, and contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The most significant accounting estimates inherent in the preparation of our condensed financial statements include estimates as to the appropriate carrying value of certain assets and liabilities which are not readily apparent from other sources. In addition, these accounting policies are described at relevant sections in this discussion and analysis and in the notes to the condensed financial statements included in this Quarterly Report on Form 10-Q.

The following discussion of our financial condition and results of operations should be read in conjunction with our unaudited financial statements for the three months ended March 31, 2021 and 2020, together with notes thereto, which are included in this Quarterly Report on Form 10-Q.

The Company has two operating segments through the operations of Quarta-Rad and Sellavir. Net income for the three months ended March 31, 2021 is comprised of:





                                         Quarta Rad      Sellavir        Total
Sales                                        244,679        90,000       334,679
Cost of Good Sold                            190,328             -       190,328
Gross Profit                                  54,351        90,000       144,351

Expenses:
General & administrative                       3,701         1,327         5,028
Advertising                                   16,060             -        16,060
Professional and consulting fees              39,540        20,806        60,346
Operating expenses                            59,301        22,133        81,434

Net income (loss) from operations             (4,950 )      67,867        62,917

Unrealized gain/(loss) on investments              -         3,474         3,474
Income tax (expense)/benefit                   1,040       (14,982 )     (13,942 )

Net income/(loss)                             (3,910 )      56,359        52,449




Consolidated Totals

Three months ended March 31, 2021 compared with the three months ended March 31, 2020

Revenues. Our net revenues increased $154,082, or 85.32% to $334,679 for the three months ended March 31, 2021 compared with $180,597 for the three months ended March 31, 2020. The increase was due to an increase in the demand of our RD1503 model and revenue from Sellavir .

Cost of Goods Sold. Our Cost of Goods Sold increased $49,362 or 35.02% to $190,328 for the three months ended March 31, 2021 compared to $140,966 for the comparable period in 2020. The increase is due to the increase in sales during the quarter.

Operating Expenses. For the three months ended March 31, 2021, our total operating expenses increased 38,311 or 88.84% to $81,434 compared to $43,123 for the three months ended March 31, 2020. The increase is primarily attributable to the Company's increase professional fees and advertising.

Net Income. Our net income increased $55,941 to $52,449 for the three months ended March 31, 2021 compared to a net loss of $3,492 for the comparable period in 2020. The increase was primarily due to an increase in sales and acquisition of Sellavir.

Quarta-Rad

Three months ended March 31, 2021 compared with the three months ended March 31, 2020

Revenues. Our net revenues increased $64,082, or 35.48% to $244,679 for the three months ended March 31, 2021 compared with $180,597 for the three months ended March 31, 2020. The increase was due to an increase in the demand of our RD1503 model.

Cost of Goods Sold. Our Cost of Goods Sold increased $49,362 or 35.02% to $190,328 for the three months ended March 31, 2021 compared to $140,966 for the comparable period in 2020. The increase is due to the increase in sales during the quarter.

Operating Expenses. For the three months ended March 31, 2021, our total operating expenses increased $16,178 or 37.52% to $59,301 compared to $43,123 for the three months ended March 31, 2020. The increase is primarily attributable to the Company's increase professional fees and advertising.

Net Loss. Our net loss increased $418 or 11.97% to $3,910 for the three months ended March 31, 2021 compared to a net loss of $3,492 for the comparable period in 2020. The increase was primarily due to an increase in expenses.





Sellavir

Three months ended March 31, 2021 compared with the three months ended March 31, 2020

Revenues. Our net revenues were $90,000 for the three months ended March 31, 2021 compared with $-0- for the three months ended March 31, 2020. The increase was due to the acquisition of Sellavir in December 2020.

Operating Expenses. For the three months ended March 31, 2021, our total operating expenses were $22,133 compared to $-0- for the three months ended March 31, 2020. The increase was due to the acquisition of Sellavir in December 2020.

Net Income. Our net income was $56,359 for the three months ended March 31, 2021 compared to $-0- for the comparable period in 2020. The increase was due to the acquisition of Sellavir in December 2020.





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Liquidity and Capital Resources. During the three months ended March 31, 2021, we used cash for operating expenses from cash on hand and the sale of products on the Internet and from independent, third party resellers and from consulting revenue from Sellavir.

Our total assets were $736,702 and $633,404 as of March 31, 2021 and December 31, 2020, respectively, consisting of $113,442 and $108,126, respectively, in cash. Our working capital was $366,858 and $314,209 as of March 31, 2021 and December 31, 2020, respectively.

We had $90,306 and $41,042 in cash provided by operating activities for the three months ended March 31, 2021 and 2020, respectively.

We had $85,010 and $-0- used by investing activities for purchase of marketable securities for the three months ended March 31, 2021 and 2020, respectively.

We had no cash provided by financing activities for the three months ended March 31, 2021 and 2020, respectively.

The Company had no formal long-term lines of credit or other bank financing arrangements as of March 31, 2021.

The Company has no current plans for the purchase or sale of any plant or equipment.

The Company has no current plans to make any changes in the number of employees.





Impact of Inflation

The Company believes that inflation has had a negligible effect on operations over the past quarter.





Capital Expenditures

The Company expended no amounts on capital expenditures for the three months ended March 31, 2021.





Plan of Operation

Our business strategy is to continue to market our website (www.quartarad.com). We have used our website to market products for sale to consumers as well to third party distributors. We will continue to strengthen our presence on e-commerce sites. We are also focusing on expanding our reseller network by targeting large consumer retail chains.

The number of detection devices, which we will be able to sell will depend upon the success of our marketing efforts through our website and the distributors that we will enter into agreement with to sell the products.

During December 2020, Quarta-Rad acquired Sellavir, Inc, a Delaware corporation, under common control, as a wholly owned subsidiary. We acquired the company in exchange for 333,333 shares of our common stock. The value of the stock on the date of issue was approximately $170,000. Sellavir is a video analytics company whose platform empowers organizations to decode videos to develop creative marketing strategies and analysis through advanced and proprietary technologies. Quarta-Rad has acquired the company to leverage Sellavir capabilities to combine it with its Radex series to offer AI-enhanced radiation detection capabilities and expand its scope outside of radiation measurement.





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We intend to implement the following tasks within the next twelve months:





Inventory:

We intend to purchase inventory to increase our sales. We believe that these funds will be initially sufficient for us to increase our inventory from Quarta-Rad, Ltd. The amount needed for inventory purchases is directly related to the demand for sales of our product.

Marketing: (Estimated cost $25,000-$75,000). In addition to the website modification costs, we intend to increase our marketing efforts on the Internet to generate leads and sales. We will also utilize funds to develop marketing brochures and materials to market the products to industry professionals such as home renovation contractors.

Secure Distribution Agreements: (Estimated cost $10,000). We plan to seek and secure distribution agreements for the sale of our detection devices.

Our management does not anticipate the need to hire additional full or part- time employees over the next three (3) months, as the services provided by our officers and directors and our independent contractors appear sufficient at this time. We believe that our operations are currently on a small scale that is manageable by these two individuals as well as our independent contractor. Our management's responsibilities are mainly administrative at this stage. While we believe that the addition of employees is not required over the next three (3) months, the professionals we plan to utilize will be considered independent contractors. We do not intend to enter into any employment agreements with any of these professionals. Thus, these persons are not intended to be employees of our company.

We currently do not own any equipment that we would seek to sell in the near future; we do not have any off-balance sheet arrangements; and we have not paid for expenses on behalf of our directors.

Off-Balance Sheet Arrangements





None.



Forward Looking Statements

This Quarterly Report on Form 10-Q, including "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 2 of Part I of this report include forward-looking statements within the meaning of Section 27A of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995 (collectively, the "Reform Act"). The Reform Act provides a safe harbor for forward-looking statements to encourage companies to provide prospective information about themselves so long as they identify these statements as forward-looking and provide meaningful cautionary statements identifying important factors that could cause actual results to differ from the projected results. All statements, other than statements of historical fact that we make in this Quarterly Report on Form 10-Q are forward-looking. The words "anticipates," "believes," "expects," "intends," "will continue," "estimates," "plans," "projects," the negative of these terms and similar expressions are intended to identify forward-looking statements. However, the absence of these words does not mean the statement is not forward-looking.

Forward-looking statements involve risks, uncertainties or other factors which may cause actual results to differ materially from the future results, performance or achievements expressed or implied by the forward-looking statements. These statements are based on our management's beliefs and assumptions, which in turn are based on currently available information. Certain risks, uncertainties or other important factors are detailed in this Quarterly Report on Form 10-Q and may be detailed from time to time in other reports we file with the Securities and Exchange Commission, including on Forms 8-K and 10-K.

We operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for us to predict all those risks, nor can we assess the impact of all those risks on our business or the extent to which any factor may cause actual results to differ materially from those contained in any forward-looking statement. We believe these forward-looking statements are reasonable. However, you should not place undue reliance on any forward-looking statements, which are based on current expectations. Further, forward-looking statements speak only as of the date they are made, and unless required by law, we expressly disclaim any obligation or undertaking to update publicly any of them considering new information or future events.





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Critical Accounting Policies

Our condensed financial statements and accompanying notes have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires management to make estimates, judgments and assumptions that affect reported amounts of assets, liabilities, revenues and expenses. We continually evaluate the accounting policies and estimates used to prepare the condensed financial statements. The estimates are based on historical experience and assumptions believed to be reasonable under current facts and circumstances. Actual amounts and results could differ from these estimates made by management. Certain accounting policies that require significant management estimates and are deemed critical to our results of operations or financial position are discussed in our Annual Report on Form 10-K for the year ended December 31, 2020 and Note 1 to the Condensed and Consolidated Financial Statements in this Form 10-Q.

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